Carbon finance company South Pole is facing allegations of greenwashing for allegedly overstating its climate claims. Companies will need to consider how they conduct due diligence when investing in carbon credits to ensure they are compliant with forthcoming greenwashing regulations.
- South Pole, a global leader in offering carbon and renewable energy credits, is being accused of greenwashing. A Bloomberg investigation published on 24 March, found that South Pole has overestimated the benefits of its carbon offsets projects.
- Kariba, one of South Pole’s key projects and a REDD+ certified scheme, claims it reduces C02 emissions by preserving forests and wildlife in Zimbabwe. However, one ratings firm which analysed the data estimated that Kariba has overclaimed 30-times more carbon credits. Another rating firm estimated that South Pole will need to operate Kariba for another 25 years to fulfil the credits that have already been generated. The investigation also found that the majority of the carbon offset funding was spent on another certification company, Carbon Green Investments (CGI), instead of on the local community.
- As a result, companies using South Pole carbon offsets will have unknowingly overstated their own progress in combating climate change.
Companies who want to continue investing in carbon credits will need to consider how they are conducting due diligence on these projects as they will face increased scrutiny under forthcoming greenwashing regulations, including the EU Green Claims Initiative and EU Directive for Empowering Consumers for the Green Transition. Under these EU regulations, companies will need to substantiate and independently verify environmental claims such as “carbon neutral” and detail any offset schemes they are using.
- Carbon offset schemes have recently come under scrutiny from consumer authorities and the courts and we can expect to see companies being held to account for making misleading statements about their climate offset schemes. In February 2023, the court in Sweden banned Arla from using the claim “net zero climate footprint”. The company had bought “credits” to offset the carbon being released into the atmosphere from producing and transporting dairy goods, but the products would only be climate compensated in 100 years, which the court ruled made the claim “unverifiable”. Cases have also been brought against numerous airline companies for their carbon offsetting schemes.
We track greenwashing litigation and consumer authority cases in our Greenwashing Brief, published every June and December. You can read more about the direction of travel on greenwashing in our Insight. We are also tracking cases against certification bodies in our RBC Litigation Database. Contact us to learn more.